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SECURITIES AND EXCHANGE COMMISSION

Form 10-K

Commission File Number 0-5232

Offshore Logistics, Inc.

Registrant’s telephone number, including area code: (337) 233-1221

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: NONE

     Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ü

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934.)

     The aggregate market value of the voting stock held by non-affiliates of the registrant as of September 30, 2002 was $379,015,735.

     The number of shares outstanding of the registrant’s Common Stock as of April 30, 2003 was 22,510,921.

DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the Definitive Proxy Statement for the 2003 Annual Meeting of Stockholders are incorporated by reference into Part III hereof.

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OFFSHORE LOGISTICS, INC.
INDEX—FORM 10-K

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OFFSHORE LOGISTICS, INC.
ANNUAL REPORT (FORM 10-K)

INTRODUCTION

     This Annual Report on Form 10-K is filed by Offshore Logistics, Inc., a Delaware corporation, which we refer to separately as Offshore Logistics or the registrant. We use the pronouns “we,” “our” and “us” to refer collectively to Offshore Logistics, Bristow Aviation Holdings, Ltd. and our consolidated subsidiaries. We also own interests in other entities that we do not consolidate for financial reporting purposes, which we refer to as unconsolidated affiliates. Offshore Logistics, its subsidiaries and the unconsolidated affiliates are each a separate corporation, limited liability company or other legal entity. Our use of the terms “we,” “our” and “us” does not suggest that we have abandoned their separate identities or the legal protections given to them as separate legal entities.

FORWARD-LOOKING STATEMENTS

     This Annual Report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are statements about our future business, strategy, operations, capabilities and results; financial projections; plans and objectives of our management; expected actions by us and by third parties, including our customers, competitors and regulators; and other matters. Some of the forward-looking statements can be identified by the use of words such as believes, belief, expects, plans, anticipates, intends, projects, estimates, may, might, would, could or other similar words. All statements in this Annual Report other than statements of historical fact or historical financial results are forward-looking statements.

     Our forward-looking statements reflect our views and assumptions on the date of this Annual Report regarding future events and operating performance including growth in International Operations and the benefits of our fleet renewal program. We believe that they are reasonable, but they involve known and unknown risks, uncertainties and other factors, many of which may be beyond our control, that may cause actual results to differ materially from any future results, performance or achievements expressed or implied by the forward-looking statements. Accordingly, you should not put undue reliance on any forward-looking statements. Factors that could cause our forward-looking statements to be incorrect and actual events or our actual results to differ from those that are anticipated are described below in “Risk Factors”.

     All forward-looking statements in this Annual Report are qualified by these cautionary statements and are only made as of the date of this Annual Report. We do not undertake any obligation, other than as required by law, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

RISK FACTORS

     If you hold our securities or are considering an investment in our securities, you should carefully consider the following risks, together with the other information contained in this Annual Report.

The demand for our services is substantially dependent on the level of activity in the oil and natural gas industry.

     We provide helicopter services to oil and natural gas exploration, development and production companies. As a result, demand for our services is substantially dependent on activity levels and transportation needs in that industry, and our revenue and profitability are largely dependent upon the worldwide levels of activity in oil and natural gas exploration, development and production. These activity levels are principally affected by trends in, and expectations regarding, oil and natural gas prices, as well as the capital expenditure budgets of oil and gas companies. We cannot predict future oil and natural gas price movements. Historically, the prices for oil and natural gas have been volatile and are subject to factors beyond our control, such as:

	•		the supply of and demand for oil and natural gas and market expectations for such supply and demand;
	•		actions of OPEC and other oil producing countries to control prices or change production levels;
	•		general economic and political conditions, both worldwide and in particular regions;
	•		governmental regulation; and

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the price and availability of alternative fuels.

     For example, oil and gas activities declined in fiscal 2003 in both the Gulf of Mexico and the North Sea. As a result, we experienced a reduced demand for our services in these regions in fiscal 2003. Oil and gas industry activity may decline again in the near future, which may decrease the demand for our services. Any prolonged reduction in oil and natural gas prices will likely depress the level of exploration, development and production activity and result in a decline in the demand for our services.

     In addition, oil and natural gas companies are continually seeking to implement measures aimed at greater cost savings. As part of these measures, these companies are attempting to improve cost efficiencies with respect to helicopter transportation services. For example, these companies may reduce staffing levels on both old and new installations by using new technology to permit unmanned installations and may reduce the frequency of transportation of employees by increasing the length of shifts offshore. The continued implementation of these kinds of measures could reduce the demand for helicopter transportation services and have a material adverse effect on our business, financial condition and results of operations.

We are highly dependent upon the level of activity in the Gulf of Mexico and the North Sea.

     Approximately 56% of our fiscal 2003 operating revenue was derived from our helicopter services provided to customers operating in North America and the North Sea. If activity in oil and natural gas exploration, development and production in either of these areas declines, our business, financial condition and results of operations could be materially and adversely affected. The decline in activity in fiscal 2003 in both the North Sea and the Gulf of Mexico negatively impacted our revenue from those regions. We cannot predict the levels of activity in these areas in future periods.

     During April 2002, the U.K. government instituted a progressive tax regime which directly impacts oil and gas exploration, development and production in the North Sea. Several oil companies have stated that the new tax regime is a deterrent to future capital spending. If the oil companies reduce their exploration and development budgets as a result of this tax change, demand for our services could be negatively impacted.

Our operations and future growth depend on the level of international oil and gas activity and our ability to operate in these regions.

     Approximately 29% of our fiscal 2003 operating revenue was attributable to our helicopter services provided to oil and gas customers operating outside of North America and the North Sea. The demand for our helicopter services in our International Operations depends on the level of oil and natural gas exploration, development and production activity in these regions. We cannot predict the level of activity in these areas in future periods.

     In addition, our ability to conduct our International Operations may be adversely affected by:

	•		local regulations restricting foreign ownership of helicopter operators;
	•		requirements to award contracts to local operators and to employ local citizens; and
	•		the number and location of new drilling concessions granted by foreign sovereigns.

     If we are unable to continue to operate or retain contracts in foreign countries, our future business, financial condition and results of operations may be adversely affected and our International Operations may not grow in accordance with our expectations.

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     Our International Operations are also subject to various risks inherent in conducting business outside the United States, including:

	•		political, social and economic instability, including risks of war, general strikes, civil disturbances and guerilla activity;
	•		governmental actions that restrict payments or the movement of funds or result in the deprivation of contract rights;
	•		the taking of property without fair compensation; and
	•		the lack of well developed legal systems in some countries which could make it difficult for us to enforce our contractual rights.

     For example, there has been recent unrest in Nigeria where we derived 41% of our fiscal 2003 operating revenue from International Operations. While this unrest has not adversely affected our International Operations, any future unrest in Nigeria or our other operating regions could adversely affect our business, financial condition and results of operations. We cannot predict whether any of these events will occur in the future in Nigeria or elsewhere.

Foreign exchange risks and controls may affect our financial position and results of operations.

     Through our foreign operations, we are exposed to currency fluctuations and exchange rate risks. The majority of our revenue and expenses from our North Sea Operations are in British Pound Sterling. In addition, some of our contracts to provide services internationally provide for payment in foreign currencies. Our foreign exchange rate risk is even greater when our revenue is denominated in a currency different from the associated costs. We attempt to minimize our foreign exchange rate risk exposure by contracting the majority of our services other than in our North Sea Operations in U.S. dollars. As a result, a strong U.S. dollar may increase the local cost of our services that are provided under U.S. dollar denominated contracts, which may reduce the demand for our services in foreign countries. Generally, we do not enter into hedging transactions to protect against foreign exchange risks related to our operating revenue.

     Because we maintain our financial statements in U.S. dollars, we are vulnerable to fluctuations in the exchange rate between the British Pound Sterling and the U.S. dollar and between other foreign currencies and the U.S. dollar. In preparing our financial statements, we must convert all non-U.S. dollar currencies to U.S. dollars. The effect of foreign currency translation is reflected in a component of stockholders’ investment and foreign currency transaction gains or losses are credited or charged to income and reflected in other income (expense). In the past three fiscal years our stockholders’ investment has decreased by as much as $29.0 million in some years and increased by as much as $27.8 million as a result of translation adjustments. Changes in exchange rates could cause significant changes in our financial position and results of operations in the future.

     We operate in countries with foreign exchange controls. These controls may limit our ability to repatriate funds from our International Operations and unconsolidated affiliates or otherwise convert local currencies into U.S. dollars. These limitations could adversely affect our ability to access cash from these operations.

We operate in many international areas through entities that we do not control.

     We conduct many of our international operations through entities in which we have a minority investment or through strategic alliances with foreign partners. For example, we have acquired interests in, and in some cases have lease and service agreements with, entities that operate aircraft in Brazil, Egypt, Mexico and Norway. We derive significant amounts of lease and service revenue and dividend income from these entities. In fiscal 2003 we derived approximately $7.3 million of dividend income from our unconsolidated affiliates. More significantly, we received approximately $54.0 million in fiscal 2003 from the provision of aircraft and other services to unconsolidated affiliates which represented approximately 33% of our fiscal 2003 operating revenue from International Operations. Because we do not own a majority or maintain voting control of these entities, we do not have the ability to control their policies, management or affairs. The interests of persons who control these entities or partners may differ from ours, and they may cause such entities to take actions which are not in our best interest. If we are unable to maintain our relationships with our partners in these entities, we could lose our ability to operate in these areas which could materially adversely affect our business and results of operations.

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We face substantial competition in both of our business segments.

     The helicopter business is highly competitive. Chartering of helicopters is usually done on the basis of competitive bidding among those having the necessary equipment, experience and resources. Factors that affect competition in our industry include price, reliability, safety record, reputation, availability, equipment and quality of service.

     In our North American Operations, we face competition from a number of providers. One of our competitors has more helicopters in service in the Gulf of Mexico than we do. We have one significant competitor in the North Sea and expect another competitor to enter the North Sea in 2004. In our International Operations, we also face significant competition. In addition, foreign regulations may also require the awarding of contracts to local operators.

     Many of our customers have the capability to perform their own helicopter operations should they elect to do so, which has a limiting effect on our rates. The loss of a significant number of our customers or termination of a significant number of our contracts could materially adversely affect our business, financial condition and results of operations.

     The production management services business is also highly competitive. There are a number of competitors that maintain a presence throughout the Gulf of Mexico. In addition, there are many smaller operators that compete with us on a local basis or for single projects or jobs. Contracts for our Production Management Services are generally for a year or less and could be awarded to our competitors upon expiration. Many of our customers are also able to perform their own Production Management Services should they choose to do so.

     As a result of significant competition, we must continue to provide safe and efficient service or we will lose market share, which could materially adversely affect our business, financial condition and results of operations.

Labor problems could adversely affect us.

     The pilots in our North American Operations and approximately 500 employees in our North Sea Operations are represented under collective bargaining agreements. Any disputes over the terms of these agreements or our potential inability to negotiate acceptable contracts with the unions that represent our employees under these agreements could result in strikes, work stoppages or other slowdowns by the affected workers. The collective bargaining agreement that covers our North American pilots became amendable in May 2003. Following approximately eight weeks of negotiations with union representatives, an agreement could not be reached on several key areas, most notably compensation levels. We and the union representatives agreed to seek assistance from the National Mediation Board in appointing an independent mediator to assist with the negotiations. If the mediation is unsuccessful, a 30 day cooling off period is mandated. We cannot predict whether our negotiations will be successful or, if not, what action our pilots might take after the cooling off period expires. If our unionized workers engage in a strike, work stoppage or other slowdown, or other employees elect to become unionized or existing labor agreements are renegotiated on, or future labor agreements contain, terms that are unfavorable to us, we could experience a disruption of our operations or higher ongoing labor costs which could adversely affect our business, financial condition and results of operations.

Helicopter operations involve risks that may not be covered by our insurance or may increase our operating costs.

     The operation of helicopters inherently involves a degree of risk. Hazards such as harsh weather and marine conditions, mechanical failures, crashes and collisions are inherent in our business and may result in personal injury, loss of life, damage to property and equipment and suspension or reduction of operations. Our aircraft have been involved in accidents in the past, some of which have included loss of life and property damage. We may experience similar accidents in the future. In addition, GPM’s operations are subject to the normal risks associated with working on oil and gas production facilities. These risks include injury to or death of personnel and damage to or loss of property.

     We attempt to protect ourselves against these losses and damage by carrying insurance, including hull and liability, general liability, workers’ compensation and property and casualty insurance. Our insurance coverage is subject to deductibles and maximum coverage amounts, and we do not carry insurance for all types of losses, including business interruption. We cannot assure you that our existing coverage will be sufficient or that in the future we will be able to maintain our existing coverage or that the premiums will not increase substantially. Our insurance costs increased substantially in fiscal 2003. In addition, future terrorist activity, accidents or other events could further increase our insurance rates. The loss of our liability insurance coverage, inadequate coverage from our liability insurance or future substantial increases in premiums could materially and adversely affect our business, financial condition and results of

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operations.

We are subject to government regulation that limit foreign ownership of aircraft companies.

     United States. We are subject to regulations pursuant to the Federal Aviation Act of 1958, as amended, and other statutes. Under the Federal Aviation Act, it is unlawful to operate certain aircraft for hire within the United States unless such aircraft are registered with the Federal Aviation Administration, or FAA, and the operator of such aircraft has been issued an operating certificate by the FAA. As a general rule, aircraft may be registered under the Federal Aviation Act only if the aircraft is owned or controlled by one or more citizens of the United States, and an operating certificate may be granted only to a citizen of the United States. For purposes of these requirements, a corporation is deemed to be a citizen of the United States only if, among other things, at least 75% of its voting interests are owned or controlled by U.S. citizens. If persons other than U.S. citizens should come to own or control more than 25% of the voting interests in us, we have been advised that our aircraft may be subject to deregistration under the Federal Aviation Act we may lose the privilege of operating within the United States. Deregistration of our aircraft or loss of our operating license for any reason, including foreign ownership in excess of the permitted levels, would materially adversely affect our ability to conduct our North American Operations. As of March 31, 2003, approximately 6.2% of our outstanding common shares were held by persons with foreign addresses. Because a substantial portion of our common stock is publicly traded, our foreign ownership may fluctuate on each trading day. In addition, these foreign ownership limitations restrict our ability to issue or sell our common stock to non-U.S. citizens which could hurt our ability to raise equity or acquire assets or businesses for common stock in the future.

     United Kingdom. We are subject to the Licensing of Air Carriers Regulations 1992, and Regulations made under the Civil Aviation Act 1992 and other statutes. We carry persons and property in our helicopters pursuant to an operating license issued by the Civil Aviation Authority, or CAA.

     Under the Licensing of Air Carriers Regulations 1992, it is unlawful to operate certain aircraft for hire within the United Kingdom unless such aircraft are approved by the CAA. The holder of an operating license must meet the ownership and control requirements of Council Regulation 2407/92. This means that the entity that operates under the license must be owned directly or through majority ownership by United Kingdom and European Economic Union Area nationals and must at all times be effectively controlled by them. We own 49% of the common stock of Bristow and have put/call arrangements with the other two stockholders. If we were to purchase any Bristow shares pursuant to this arrangement, we would be required to find a qualified European owner to acquire those shares to retain Bristow’s CAA operating license. Revocation of the CAA operating license for any reason would have a material adverse effect on our North Sea Operations.

     International. Certain of our International Operations are subject to restrictions on foreign ownership. Because of this, these operations are conducted primarily through unconsolidated affiliates in which local citizens own interests, or pursuant to arrangements under which we operate assets or conduct operations under contracts with local entities. If changes in local regulation further limit foreign ownership, we may not be permitted to operate in certain regions under our existing arrangements.

     We cannot assure you that there will not be changes in or adoptions of U.S., U.K. or other foreign laws, regulations or administrative requirements in any region where we operate, or the interpretation thereof, which could restrict or prohibit our ability to operate in certain regions. Any such restriction or prohibition on our ability to operate may materially adversely affect our business, financial condition and results of operations.

Failure to maintain an acceptable safety record may have an adverse impact on our ability to attract and retain customers.

     Our customers consider safety and reliability as primary concerns in selecting a provider of helicopter transportation services. If we fail to maintain a record of safety and reliability that is satisfactory to our customers, our ability to retain current customers and attract new customers may be adversely affected.

Our failure to attract and retain qualified personnel could have an adverse effect on us.

     Our ability to attract and retain qualified pilots, mechanics and other highly trained personnel is an important factor in determining our future success. Many of our customers require pilots of aircraft that service them to have very high levels of flight experience. The market for these experienced and highly trained personnel is competitive and will become more competitive if oil and gas industry activity levels increase. Accordingly, we cannot assure you that we will be

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successful in our efforts to attract and retain such persons. Some of our pilots and mechanics and those of our competitors are members of the U.S. military reserves and could be called to active duty. If significant numbers of such persons are called to active duty, it would reduce the supply of such workers and likely increase our labor costs.

Our operations are subject to weather related and seasonal fluctuations.

     Our operations can be impaired by harsh weather conditions generally. Poor visibility, high wind and heavy precipitation can affect the operation of helicopters and result in a reduced number of flight hours. A significant portion of our operating revenue is dependent on actual flight hours and a substantial portion of our direct costs is fixed. Thus, prolonged periods of harsh weather can materially and adversely affect our business, financial condition and results of operations.

     In the Gulf of Mexico, the months of December through March have more days of harsh weather conditions than the other months of the year. Heavy fog during those months often limits visibility. In addition, in the Gulf of Mexico, June through November is tropical storm season. When a tropical storm is about to enter or begins developing in the Gulf of Mexico, flight activity may increase because of evacuations of offshore workers. However, during tropical storms, we are unable to operate in the area of the storm. In addition, as a significant portion of our facilities is located along the Gulf of Mexico coast, tropical storms may cause substantial damage to our property there, including helicopters. Additionally, we incur costs in evacuating our aircraft, personnel and equipment prior to tropical storms.

     The fall and winter months have fewer hours of daylight, particularly in the North Sea. Consequently, flight hours are generally lower at these times, which typically results in a reduction in operating revenue during those months. While some of our aircraft are equipped to fly at night, we generally do not do so. Accordingly, our reduced ability to operate in harsh weather conditions and darkness may adversely affect our business, financial condition and results of operations.

Bristow’s obligations may adversely impact us.

     As of March 31, 2003, we had a $114.7 million pension liability related to Bristow’s underfunded pension plan, of which approximately $80.5 million was recorded in fiscal 2003. In accordance with U.S. accounting rules, the liability is recorded through a direct charge to stockholders’ investment. In addition, the U.K. rules governing pension plan funding require us to make additional cash contributions into the plan over the next three years in the range of $5.0 million to $6.0 million per year. We have not yet determined whether we will make these additional contributions through periodic lump sum payments or through an increase of the existing contribution rate. As a result, the charge to earnings for fiscal 2004 will increase over the amounts expensed in fiscal 2003 by approximately $10.5 million. Additional charges to stockholders’ investment and earnings likely will be required in future years and these charges could be significant. These charges may have a material adverse effect on our financial condition and results of operations.

     In addition, Bristow has been notified by the U.K. Inland Revenue of a potential tax liability related to the deduction of certain aircraft maintenance costs. Although the actual amount of this potential liability has not been determined, if ultimately determined to be due, such liability would result in cash payments for taxes to the U.K. Inland Revenue which could be significant. This controversy affects only the timing of deductions and would not result in any additional tax expense being charged to income.

Environmental regulations and liabilities may increase our costs and adversely affect us.

     All of our operations are subject to material and local environmental laws and regulations that impose limitations on the discharge of pollutants into the environment and establish standards for the treatment, storage, recycling, and disposal of toxic and hazardous wastes. The nature of the business of operating and maintaining helicopters requires that we use, store, and dispose of materials that are subject to environmental regulation. Liabilities associated with environmental matters could have a material adverse impact on our business, financial condition and results of operations. For additional information see “Legal Proceedings.”

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PART I

ITEM 1. Business

OVERVIEW

     We are a leading provider of helicopter transportation services to the worldwide offshore oil and gas industry with major operations in the Gulf of Mexico and the North Sea. We also have operations, both directly and indirectly, in most of the other major offshore oil and gas producing regions of the world, including Australia, Brazil, China, Mexico, Nigeria and Trinidad. As of March 31, 2003, we operated 335 aircraft and our unconsolidated affiliates operated an additional 91 aircraft throughout the world. We are also a leading provider of production management services for oil and gas production facilities in the Gulf of Mexico.

     We provide helicopter transportation services through our consolidated subsidiaries, our interest in Bristow Aviation Holdings, Ltd., or Bristow, and our unconsolidated affiliates. Our Production Management Services are conducted through our wholly-owned subsidiary, Grasso Production Management, or GPM.

     The United Kingdom, as do most countries, limits foreign ownership of aviation companies. To comply with these restrictions, we own only 49% of the common stock of Bristow, but we own 100% of Bristow’s subordinated debt. In addition, we have a put/call agreement with the other two owners of Bristow which grants us the right to buy all of their shares of Bristow common stock (and them the right to require us to buy all of their shares). Under U.K. law, to maintain Bristow’s operating license, we would be required to find a qualified European owner to acquire any of the Bristow shares that we have the right or obligation to acquire under the agreement.

     To comply with other foreign ownership limitations yet expand internationally, we have formed or acquired interests in numerous foreign helicopter operations. These interests typically combine local ownership interest with our experience in providing helicopter services to the oil and gas industry. Because we do not own a majority of the equity or maintain voting control of these entities, we may not have the ability to control their policies, management or affairs. We refer to these entities as unconsolidated affiliates.

     For a further description of our unconsolidated affiliates, see the statements under “Introduction” and “Risk Factors” and Note C in our “Notes to Consolidated Financial Statements” included elsewhere in this Annual Report. For a further discussion of Bristow see Note J in our “Notes to Consolidated Financial Statements” included elsewhere in this Annual Report.

     We operate our business in two segments: Helicopter Activities and Production Management Services. We conduct our Helicopter Activities through four business units:

	•		North American Operations;
	•		North Sea Operations;
	•		International Operations; and
	•		Technical Services.

     In our previous public disclosures, we have referred to our North American Operations as “Air Log” and to our North Sea Operations as “Bristow.” For additional information about our two segments, see Note K in our “Notes to Consolidated Financial Statements” included elsewhere in this Annual Report. For a description of certain risks affecting our business and operations, see “Risk Factors” included in this Annual Report.

     We are a Delaware corporation incorporated in 1969. Our executive offices are located at 224 Rue de Jean, Post Office Box 5-C, Lafayette, Louisiana, 70505. Our telephone number is (337) 233-1221.

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     All of our periodic report filings with the Securities and Exchange Commission, or SEC, pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, are made available, free of charge, through our website located at http://www.olog.com, including our Annual Report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, and any amendments to these reports. These reports are available through our website as soon as reasonably practicable after we electronically file or furnish such material to the Securities and Exchange Commission . In addition, the public may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 450 Fifth Street, NW, Washington, D.C. 20549 or on their Internet website located at http://www.sec.gov. The public may obtain information on the operation of the Public Reference Room and the SEC’s Internet website by calling the SEC at 1-800-SEC-0330.

HELICOPTER ACTIVITIES

     Our customers charter our helicopters to transport personnel and time-sensitive equipment from onshore bases to offshore drilling rigs, platforms and other installations. We classify our aircraft fleet into three categories: small, medium and large. Small aircraft typically hold four to six passengers and are better suited for daytime flights and shorter routes. Medium aircraft hold up to 13 passengers and are the most versatile part of our fleet as they can fly in a variety of different operating conditions and a variety of distances. Large aircraft hold up to 18 passengers and are capable of flying in harsh weather conditions.

     The following table sets forth the number of our aircraft operated as of the dates indicated:

     The following table shows the distribution of our small, medium and large aircraft among our business units as of March 31, 2003:

North American Operations

     We conduct our North American Helicopter Activities primarily from 14 operating facilities along the Gulf of Mexico, with additional operations in Alaska. As of March 31, 2003, we operated 163 aircraft in the Gulf of Mexico and 15 aircraft in Alaska. We are the second largest supplier of helicopter services in the Gulf of Mexico and a major supplier in Alaska, where we fly the entire length of the Alyeska pipeline every day. The Gulf of Mexico is a major offshore oil and gas producing region with approximately 4,000 production platforms. These platforms are typically unmanned and are most efficiently serviced by our small aircraft.

North Sea Operations

     We are the second largest provider of helicopter services in the North Sea, where there are harsh weather conditions and geographically concentrated offshore facilities. The facilities in the North Sea are large and require frequent crew change flight services. We deploy a majority of our large aircraft in this region. In addition to our oil and gas helicopter services, we are the sole civil supplier of search and rescue services to Her Majesty’s Coast Guard. As of March 31, 2003,

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we operated 57 aircraft in the North Sea. We also have a service agreement with, and ownership interest in, an unconsolidated affiliate in Norway whereby we provide services and technical support to this entity and lease them aircraft for use in their operations.

International Operations

     We also provide helicopter services to most of the major offshore oil and gas producing regions of the world beyond the Gulf of Mexico and the North Sea. Our International Operations are conducted in a variety of different locales, where we deploy small, medium and large aircraft dependent on the mission requirements and local operating conditions. As of March 31, 2003, our International fleet was composed of 100 aircraft in 15 different countries. Of these aircraft, 38 helicopters were operated in Central and South America (Brazil, Colombia, Mexico and Trinidad), 36 aircraft in Nigeria, 10 aircraft in Australia and 16 aircraft elsewhere throughout the world.

Unconsolidated Affiliates

     Most countries limit foreign ownership of aviation companies. To comply with these regulations and yet expand internationally, we have formed or acquired interests in numerous foreign helicopter operations. These investments typically combine a local ownership interest with our experience in providing helicopter services to the oil and gas industry. These arrangements have allowed us to expand operations while diversifying the risks and reducing the capital outlays associated with independent expansion. We lease many of our own aircraft to these unconsolidated affiliates to service customers in foreign countries. Set forth below is a brief description of our significant unconsolidated affiliates:

	Mexico. We own a 49% interest in Heliservicio Campeche, S.A. de C.V. or HC, a Mexican corporation that provides offshore helicopter transportation primarily to the Mexican national oil company, and onshore helicopter services to the Mexican Federal Electric Commission. As of March 31, 2003, HC owned three aircraft and leased 20 aircraft from us to service its customers.

	Brazil. We own a 20% interest in Aeroleo Taxi Aereo S.A., or Aeroleo, a Brazilian corporation. Aeroleo provides offshore helicopter transportation services primarily to the Brazilian national oil company, and also serves other oil and gas companies. As of March 31, 2003, Aeroleo owned two aircraft and leased nine aircraft from us.

	Egypt. We own a 25% interest in Petroleum Air Services, or PAS, an Egyptian corporation. PAS provides helicopter and fixed wing transportation to the oil and gas industry. Additionally, spare fixed-wing capacity is chartered to tourism operators. As of March 31, 2003, PAS owned 30 aircraft and did not lease any aircraft from us.

	Norway. We own a 49% interest in Norsk Helikopter AS, a Norwegian corporation that provides helicopter transportation services in the Norwegian sector of the North Sea. As of March 31, 2003, Norsk operated three aircraft and leased six aircraft from us.

	United Kingdom. We own a 50% interest in both FBS Limited, or FBS, and FB Heliservices Limited, or FBH, British corporations which principally provide pilot training and maintenance services to the British military. As of March 31, 2003, FBS and FBH owned a total of 53 aircraft and did not lease any aircraft from us.

Technical Services

     Our Technical Services business unit provides helicopter repair and overhaul services from facilities located in Tucson, Arizona, New Iberia, Louisiana, and Redhill, England. These services include airframe refurbishments, engine overhauls, major inspections, engineering and design services, technical manpower support and transmission testing. While a portion of this work is performed on our own aircraft, the majority of these services are performed for third parties. Our Technical Services business unit also provides engineering and administrative support to the 53 aircraft operated by FBS and FBH for training the British military.

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PRODUCTION MANAGEMENT SERVICES

     We are also a leading independent contract operator of oil and gas production facilities in the Gulf of Mexico. As of March 31, 2003, we managed or had personnel assigned to 239 production facilities in the Gulf of Mexico. Our customers are typically independent oil and gas companies who hire us to monitor and maintain their offshore production facilities and provide other services for certain onshore facilities. When servicing offshore oil and gas production facilities, our employees normally live on the facility for a seven-day rotation. Our services include furnishing personnel, engineering services, production operating services, paramedic services and providing transportation of personnel and supplies between onshore bases and offshore facilities. This provides us additional opportunities to use our helicopter transportation services. We also handle regulatory and production reporting for some of our customers.

     The production management business depends primarily on production activity levels in the offshore oil and gas industry. Since 90% of our production management costs consist of labor and contracted transportation services, we are able to scale our operations to market conditions.

AIRCRAFT FLEET

     The composition of our fleet as of March 31, 2003, and some of the characteristics of the individual types of aircraft we own or lease are as follows:

We owned 329 of the 335 aircraft that we operated as of March 31, 2003. We hold the remaining six aircraft under operating leases.

Fleet Management

     We are able to deploy our aircraft to the regions with the greatest demand. There are also additional markets for helicopter services beyond the oil and gas industry. These other markets include emergency medical transportation, agricultural and forestry support and general aviation activities. While we do not service these markets, they enable us to better manage our helicopter fleet by providing both a source of additional aircraft during times of high demand in the oil and gas industry, and potential purchasers for our excess aircraft during times of reduced demand in the oil and gas industry.

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     During the past fiscal year, we initiated a fleet renewal program. In December 2002, we entered into a contract with Sikorsky Aircraft Corporation, a major helicopter manufacturer, to acquire 15 new medium sized helicopters, which are our most versatile aircraft. This agreement includes a trade-in feature for the first 15 new aircraft acquired. Three of the 15 initial aircraft were delivered subsequent to the end of fiscal 2003 and the remaining 12 aircraft are expected to be delivered at a rate of three aircraft per year from calendar 2003 through 2006. In addition, the contract gives us the option to purchase up to 24 additional aircraft with deliveries through 2008.

     In connection with our fleet renewal plan, in March 2003, we also entered into a contract with Bell Helicopter Textron Canada Ltd., a major helicopter manufacturer, to acquire 14 new small helicopters. Two of these aircraft are expected to be delivered in 2003, seven are expected to be delivered in 2004 and five are expected to be delivered in 2005. In addition, the contract gives us the option to purchase an additional five aircraft for delivery in 2004 and 2005.

CUSTOMERS AND CONTRACTS

     The principal customers for our Helicopter Activities are national and international oil and gas companies. During fiscal 2003, 2002 and 2001, Shell Oil Company accounted for 15%, 14% and 13%, respectively, of our operating revenue. No other customer accounted for 10% or more of our operating revenue during those fiscal years.

     Our customers charter helicopters for varying periods and, in some cases, these contracts may permit the customer to cancel the charter before the end of the contract term. Our charges under these charter contracts are generally based on either a daily or monthly fixed fee plus additional fees for each hour flown. We also provide services to customers on a basis we refer to as “ad hoc”, which usually entails a shorter notice period and shorter duration. Our charges for ad hoc services are generally based on either an hourly rate, or a daily or monthly fixed fee plus additional fees for each hour flown. Our rate structure is based on fuel costs remaining at or below a predetermined threshold. Fuel costs in excess of this threshold are charged to the customer.

     Customers of our production management business are primarily independent oil and gas companies that own oil and gas production facilities in the Gulf of Mexico. These companies outsource production management to companies such as GPM. This allows the customers to focus on their core activities, which are the exploration for and development of oil and gas reserves. During the past three fiscal years, no single production management customer accounted for more than 10% of our operating revenue.

GOVERNMENT REGULATION

     United States. As a commercial operator of small aircraft, our U.S. operations are subject to regulations under the Federal Aviation Act of 1958, and other laws. We carry persons and property in our helicopters under an Air Taxi Certificate granted by the Federal Aviation Administration, or FAA. The FAA regulates our U.S. flight operations and, in this respect, exercises jurisdiction over personnel, aircraft, ground facilities and certain technical aspects of our operations. The National Transportation Safety Board is authorized to investigate aircraft accidents and to recommend improved safety standards. Our U.S. operations are also subject to the Federal Communications Act of 1934 because we use radio facilities in our operations.

     Under the Federal Aviation Act, it is unlawful to operate certain aircraft for hire within the United States unless such aircraft are registered with the FAA and the FAA has issued an operating certificate to the operator. As a general rule, aircraft may be registered under the Federal Aviation Act only if the aircraft are owned or controlled by one or more citizens of the United States and an operating certificate may be granted only to a citizen of the United States. For purposes of these requirements, a corporation is deemed to be a citizen of the United States only if, among other things, at least 75% of its voting interests are owned or controlled by United States citizens. If persons other than United States citizens should come to own or control more than 25% of our voting interest, we have been advised that our aircraft may be subject to deregistration under the Federal Aviation Act and we may lose our ability to operate within the United States. Deregistration of our aircraft for any reason, including foreign ownership in excess of permitted levels, would materially adversely affect our ability to conduct our North American Operations. As of March 31, 2003, approximately 1,387,600 of our common shares were held by persons with foreign addresses. These shares represented approximately 6.2% of our total outstanding common shares as of March 31, 2003. Because a substantial portion of our common stock is publicly traded, our foreign ownership may fluctuate on each trading day.

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     United Kingdom. Our U.K. operations are subject to the Licensing of Air Carriers Regulations 1992, and Regulations made under the Civil Aviation Act 1982 and other laws. We carry persons and property in our helicopters under an operating license issued by the Civil Aviation Authority, or CAA.

     The CAA regulates our U.K. flight operations, exercises jurisdiction over personnel, aircraft, ground facilities and certain technical aspects of those operations. Accident investigations are carried out by an inspector from the Air Accident Investigation Branch of the Department of the Environment, Transport and Regions. The CAA often imposes improved safety standards on the basis of a report of the inspector.

     Under the Licensing of Air Carriers Regulations 1992, it is unlawful to operate certain aircraft for hire within the United Kingdom unless such aircraft are approved by the CAA. Under Council Regulation 2407/92, majority ownership of a holder of an operating license must be held by United Kingdom or European Economic Area nationals and must at all times be effectively controlled by them, as control is defined by the CAA.

     International. Our operations in areas other than the United States and the United Kingdom are subject to local governmental regulations in those areas. Because of the impact of local laws, we conduct these operations primarily through entities in which local citizens own a majority interest and we hold only a minority interest, or under contracts that provide for us to operate assets for the local companies or to conduct their flight operations. Changes in local laws, regulations or administrative requirements or their interpretation may have a material adverse effect on our business or financial condition or on our ability to continue operations in these areas.

     Production Management. The Minerals Management Service Bureau of the United States Department of the Interior regulates the operations of oil and gas producers in the outer continental shelf of the Gulf of Mexico and, in this respect, exercises jurisdiction over personnel, production facilities and certain technical aspects of GPM’s operations.

COMPETITION

     The helicopter transportation business is highly competitive throughout the world. We compete against several providers in almost all of our regions of operations. We have one significant competitor in the Gulf of Mexico and another significant competitor in the North Sea. We believe that it is difficult for additional significant competitors to enter our industry because it requires considerable working capital, a complex system of onshore and offshore bases, personnel and operating experience. However, these requirements can be overcome with the appropriate level of customer support and commitment. For example, we expect a new competitor to enter the North Sea in 2004.

     Customers charter helicopters on the basis of competitive bidding among providers who have the necessary experience, equipment, resources and professional reputation. As contracts expire, our customers typically negotiate renewal terms with us for the next contract period. Sometimes, however, customers may solicit new bids. Contracts in our North American Operations are generally renewable on an annual or shorter basis, which subjects us to competition on a regular basis. In our North Sea and International Operations, contracts tend to be of longer duration.

     In addition, many of our customers in the oil and gas industry have the capability to perform their own helicopter services should they elect to do so, which has a limiting effect on our rates.

     The production management business is also highly competitive. There are a number of competitors that maintain a presence throughout the Gulf of Mexico. In addition, there are many smaller operators that compete locally or for single projects or jobs. The two key elements in competing for production management contracts are personnel costs and transportation costs. In addition, the reliability of the production manager and the quality of its personnel, training programs and safety record are also important competitive factors.

INDUSTRY HAZARDS AND INSURANCE

     Hazards, such as harsh weather and marine conditions, mechanical failures, crashes and collisions are inherent in the offshore transportation industry and may cause losses of equipment, revenue and death of personnel.

     In the last 12 months, we have had three helicopter accidents involving fatalities: an accident in Greece resulted in five fatalities; an accident in the North Sea resulted in 11 fatalities; and an accident in the Gulf of Mexico resulted in one fatality and three people being injured. We maintained insurance with respect to the aircraft involved and related liabilities and believe that our insurance coverage will be adequate to cover any claims ultimately paid.

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     We maintain hull and liability insurance, which generally insures us against damage to our aircraft, as well as certain legal liabilities to others. We also carry workers’ compensation, auto liability, property and casualty coverages for most of our U.S. and U.K. operations. It is also our policy to carry insurance for or require our customers to indemnify us against expropriation, war risk and confiscation of the helicopters we use in our international operations.

     Recent terrorist attacks, the continuing threat of terrorist activity and economic and political uncertainties have led to significant increases in our premiums for much of our insurance protection. There is no assurance that in the future we will be able to maintain our existing coverage or that we will not experience further substantial increases in premiums. There can also be no assurance that our liability coverage will be adequate to cover all potential claims that may arise.

     Our production management operations are subject to the normal risks associated with working on oil and gas production facilities. These risks could result in damage to or loss of property and injury to or death of personnel. We carry customary business insurance including general liability, workers’ compensation, automobile liability and property and casualty coverages.

ENVIRONMENTAL

     All of our operations are subject to national and local laws and regulations controlling the discharge of materials into the environment or otherwise relating to the protection of the environment. To date, such laws and regulations have not had a material adverse effect on our business, results of operations or financial condition. Increased public awareness and concern over the environment, however, may result in future changes in the regulation of the oil and gas industry, which in turn could adversely affect us. We have been named as a potentially responsible party in connection with certain sites. See “Item 3. Legal Proceedings.”

EMPLOYEES

     As of March 31, 2003, we employed approximately 3,300 employees.

     We employ approximately 250 pilots in our North American Operations as of March 31, 2003. All of them are represented by the Office and Professional Employees International Union, or OPEIU, under a collective bargaining agreement. Because this agreement became amendable in May 2003, we began negotiations with union representatives in March 2003. After approximately eight weeks of discussions, an agreement could not be reached on several key areas, most notably compensation levels. Both management and the union representatives agreed to seek assistance from the National Mediation Board, or NMB, who appointed an independent mediator to assist with the negotiations. However, if the mediation fails to resolve the dispute, a 30-day “cooling off period” will begin. If the dispute remains unresolved after the cooling off period, then these employees would be entitled to call a strike or engage in a work stoppage.

     With respect to our Alaska-based mechanics (approximately 20 employees), an election was held on July 21, 2000 with the mechanics voting in favor of union representation by the International Union of Operating Engineers, or IUOE. Negotiations with IUOE commenced in the Fall of 2000 and continued through February 2003. On December 16, 2002, an Alaska-based employee petitioned the NMB for an election alleging a representative dispute again involving the Alaska-based mechanics and related employees. The NMB ordered an election to be held to determine the proper representative body, and included the employee and the IUOE as choices in the election. On March 19, 2003, the votes were tallied and only 11 of the 23 eligible voters cast a ballot. Because less than a majority of the eligible employees voted in the election, the NMB issued a dismissal in the case. No representative was certified, and the mechanics and related employees have returned to non-union status. Under the NMB’s rules, it will not accept another application for an election among the group for a period of one year unless unusual or extraordinary circumstances exist.

     We do not believe that current ongoing efforts will place us at a disadvantage with our competitors as we believe that pay scales, benefits, and work rules will continue to be similar throughout the industry.

     We employ approximately 500 employees (pilots, air crewman, mechanics, and support staff) in our North Sea Operations and certain Technical Services Operations, that are represented by collective bargaining agreements which are ongoing with no specific termination dates.

     We believe that our relations with our employees are satisfactory.

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ITEM 2. Properties

     We describe the number and types of aircraft we operate under “Business—Aircraft Fleet” above. In addition, we lease the significant properties listed below for use in our operations. These facilities are generally suitable for our operations and in most cases can be replaced with other available facilities if necessary.

	•		Approximately 16.8 acres of land at the Acadiana Regional Airport in New Iberia, Louisiana, under a lease expiring in 2030. We have constructed on that site office, training, parts facilities and helicopter maintenance facilities containing about 64,000 square feet of floor space. The property has access to the airport facilities, as well as to a major highway.
	•		Approximately 14,440 square feet of office space in a building in Lafayette, Louisiana under a lease expiring in 2004.
	•		Land and facilities at Redhill Aerodrome near London, England under a lease expiring in 2075. Our leases of various hangars, offices and aviation fuel facilities at Redhill Aerodrome expire during 2003. Negotiations are currently taking place over the renewal of some of these leases for a period of up to 10 years.
	•		A helicopter terminal, offices and hangar facilities at Aberdeen Airport, Scotland under a lease expiring in 2013 with an option to extend to 2023. We also maintain additional hangar and office facilities at Aberdeen Airport under a lease expiring in 2030.
	•		Various hangars and terminal access at Norwich Airport, England under a lease expiring in 2008.
	•		Office space and hangar facilities at Sumburgh Airport in Sumburgh, Shetland under a lease expiring in 2004 with renewal options through 2019.
	•		Approximately 8,036 square feet of office space in a building in Houston, Texas, under a lease expiring in 2006, which is used by our production management business.
	•		Approximately 42,000 square feet of office and shop space in a building in Tucson, Arizona under a lease expiring in 2007, which is used by our technical services business unit.

     In addition to these facilities, we lease various office and operating facilities worldwide, including facilities along the Gulf of Mexico which support our North American Operations and numerous residential locations near our operating bases in the United Kingdom, Australia, China, Nigeria, and in the Caribbean primarily for housing pilots and staff supporting those areas of operation.

ITEM 3. Legal Proceedings

     The United States Environmental Protection Agency, also referred to as the EPA, has in the past notified us that we are a potential responsible party, or PRP, at three former waste disposal facilities that are on the National Priorities List of contaminated sites. Under the federal Comprehensive Environmental Response, Compensation, and Liability Act, also known as the Superfund law, persons who are identified as PRPs may be subject to strict, joint and several liability for the costs of cleaning up environmental contamination resulting from releases of hazardous substances at National Priorities List sites. We were identified by the EPA as a PRP at the Western Sand and Gravel Superfund site in Rhode Island in 1984, at the Sheridan Disposal Services Superfund site in Waller County, Texas in 1989, and at the Gulf Coast Vacuum Services Superfund site near Abbeville, Louisiana in 1989. We have not received any correspondence from the EPA with respect to the Western Sand and Gravel Superfund site since February 1991, nor with respect to the Sheridan Disposal Services Superfund site since 1989. Remedial activities at the Gulf Coast Vacuum Services Superfund site were completed in September 1999 and the site was removed from the National Priorities List in July 2001. Although we have not obtained a formal release of liability from the EPA with respect to any of these sites, we believe that our potential liability in connection with these sites is not likely to have a material adverse effect on our business or financial condition.

     We are involved from time to time in various litigation and regulatory matters arising in the ordinary course of business. The amount, if any, of our ultimate liability with respect to these matters cannot be determined, but we do not expect the resolution of any pending matters to have a material adverse effect on our business or financial condition.

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ITEM 4. Submission of Matters to a Vote of Security Holders

     Not applicable.

PART II

ITEM 5. Market for the Registrant’s Common Equity and Related Stockholder Matters

     Since March 12, 2003, our common stock has been listed on the New York Stock Exchange under the symbol “OLG”. Prior to becoming listed on the NYSE, the common stock had been quoted on the Nasdaq National Market system since 1984.

     The following table shows the range of closing prices for our common stock during each quarter of our last two fiscal years.

     As of April 30, 2003, there were approximately 844 holders of record of the common stock.

     We have not paid dividends on our common stock since January 1984. On January 27, 1998, Offshore Logistics issued $100 million of 7 7/8% Senior Notes due 2008. The terms of the Senior Notes restrict our payment of cash dividends to shareholders.

     Please refer to Item 12 of this Annual Report for information concerning securities authorized under our equity compensation plans.

ITEM 6. Selected Financial Data

     The following table contains selected historical consolidated financial data for us. You should read this table along with Management’s Discussion and Analysis of Financial Condition and Results of Operations and the Consolidated Financial Statements and “Notes to Consolidated Financial Statements” that are included elsewhere in this Annual Report.

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ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

     Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with “Forward-Looking Statements”, “Risk Factors” and our Consolidated Financial Statements for the fiscal years ended March 31, 2003, March 31, 2002 and March 31, 2001, and the related notes thereto, included elsewhere in this Annual Report.

General

     We are a leading provider of helicopter transportation services to the worldwide offshore oil and gas industry with major operations in the Gulf of Mexico and the North Sea. We also have operations, both directly and indirectly, in most of the other major offshore oil and gas producing regions of the world, including Australia, Brazil, China, Mexico, Nigeria and Trinidad. Additionally, we are a leading provider of production management services for oil and gas production facilities in the Gulf of Mexico. As of March 31, 2003, we operated 335 aircraft and our unconsolidated affiliates operated an additional 91 aircraft throughout the world.

     We operate our business in two segments: Helicopter Activities and Production Management Services. We conduct our Helicopter Activities through the following four business units:

	•		North American Operations;
	•		North Sea Operations;
	•		International Operations; and
	•		Technical Services.

     In our previous public disclosures, we have referred to our North American Operations as “Air Log” and to our North Sea Operations as “Bristow.” In fiscal 2002, we began to report Technical Services as a separate business unit within our Helicopter Activities segment when we expanded these operations through our acquisition of an aircraft engine and component overhaul company. As a result of the acquisition, we now provide certain engine repair and overhaul services to third parties as well as for our own operations, in addition to other helicopter engineering, refurbishment and repair services. The acquired company was formerly affiliated with a group of entities that are investors in HC, our unconsolidated affiliate in Mexico. For additional information about this acquisition, see Note I in the “Notes to Consolidated Financial Statements” included elsewhere in this Annual Report.

     In fiscal 2003, our North American Operations, North Sea Operations, International Operations and Technical Services contributed 25%, 31%, 29% and 6%, respectively, of our operating revenue. While operating revenue from all of the business units within our Helicopter Activities segment has increased over the past three fiscal years. We expect that the percentage of our overall revenue derived from our International Operations will continue to increase as the major oil and gas companies continue to focus their operations in these regions.

     Our Production Management Services segment contributed the remaining 9% of our operating revenue in fiscal 2003. Operating revenue from this segment in fiscal 2003 increased from fiscal 2002 primarily due to the addition of a contract with a major customer.

     Our operating revenue depends on the demand for our services and the pricing terms of our contracts. We measure the demand for our helicopter services in flight hours. Demand for our services depends on the level of worldwide offshore oil and gas exploration, development and production activities. Our customers’ exploration and development activities are influenced by actual and expected trends in commodity prices for oil and gas. Exploration and development activities generally use medium size and larger aircraft on which we typically earn higher margins. Production related activities are less sensitive to variances in commodity prices, and accordingly provide a more stable activity base for our flight operations. We estimate that a majority of our operating revenue from Helicopter Activities is related to the production activities of the oil and gas companies. Additionally, our Production Management Services are less affected by downturns in the offshore oil and gas industry because we are able to scale our operations in response to market conditions.

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     We generate additional revenue, which we refer to as corporate revenue, from intercompany leases of aircraft within our Helicopter Activities segment. This revenue is eliminated in consolidation.

     Drilling related activities affect the demand for our crew change services. During fiscal 2003, the number of drilling rigs in the Gulf of Mexico averaged 126 per month compared to 148 per month during fiscal 2002. As a result, demand for our crew change services in our North American Operations decreased significantly during fiscal 2003. Until the drilling activity in the Gulf of Mexico increases, we expect that demand for our crew change services in our North American Operations will not increase.

     During April 2002, the U.K. Government instituted a progressive tax regime which directly impacts oil and gas production and exploration in the North Sea. Several oil companies have stated that the new tax regime is a deterrent to future capital spending. Should the oil companies significantly reduce their exploration and development budgets as a result of this tax change, demand for our services could be negatively impacted.

     Our helicopter contracts are generally based on a two-tier rate structure consisting of a daily or monthly fixed fee plus additional fees for each hour flown. We also provide services to customers on an “ad hoc” basis, which usually entails a shorter notice period and shorter duration. Our charges for ad hoc services are generally based on an hourly rate, or a daily or monthly fixed fee plus additional fees for each hour flown. We estimate that our ad hoc services have a higher margin than our other helicopter contracts due to supply and demand dynamics. Our rate structure is based on fuel costs remaining at or below a predetermined threshold. Fuel costs in excess of this threshold are charged to the customer.

     Our helicopter contracts are for varying periods and generally permit the customer to cancel the charter before the end of the contract term. In our North American Operations, we typically enter into short term contracts for 12 months or less. In our North Sea Operations, contracts are longer term, generally between two and five years. We have one seven year contract in the North Sea with a major international oil company. In our International Operations, contract length generally ranges from three to five years. At the expiration of a contract, our customers typically negotiate renewal terms with us for the next contract period. Sometimes customers solicit new bids at the expiration of a contract. Contracts are generally awarded based on a number of factors, including price, quality of service, equipment and record of safety. An incumbent operator has a competitive advantage in the bidding process based on its relationship with the customer, its knowledge of the site characteristics and its understanding of the cost structure for the operations.

     Maintenance and repair expenses, training costs, employee wages and insurance premiums represent a significant portion of our overall expenses. Our production management costs also include contracted transportation services. Our consolidated operating expenses increased 11.4% in fiscal 2003 due primarily to wage increases for pilots, mechanics and other employees and higher insurance premiums. We expense maintenance and repair costs, including major aircraft component overhaul costs, as the costs are incurred. Certain major aircraft components, primarily engines and transmissions, are maintained by third party vendors under contractual arrangements. The maintenance costs related to these contractual arrangements are recorded ratably as the components are used to generate flight revenue. As a result, our earnings in any given period are directly impacted by the amount of our maintenance and repair expenses for that period.

     In addition to our variable operating expenses, we incur fixed charges for depreciation of our property and equipment. For accounting purposes, we depreciate our helicopters on a straight-line basis over their estimated useful lives to an estimated residual value of 30% to 50% of their original cost. We generally estimate the life of a helicopter to be seven, 10 or 15 years depending on its size and condition. We estimate the residual value of our helicopters based on the type of the aircraft.

     We only own 49% of the common stock of Bristow, but we own 100% of Bristow’s subordinated debt. In addition, we have a put/call agreement with the other two owners of Bristow which grants us the right to buy all of their shares of Bristow common stock and grants to each of them the right to require us to buy their shares. The per share price in any such sale would be equal to its par value plus accrued interest. Under U.K. law, to maintain Bristow’s operating license, we would be required to find a qualified European owner to acquire any of the Bristow shares that we have the right or obligation to acquire under the agreement. As a result of our ownership and contractual arrangements, we consolidate the results of Bristow and its subsidiaries. For additional information about Bristow, see Note A and Note J in the “Notes to Consolidated Financial Statements” included elsewhere in this Annual Report.

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     As a result of local laws limiting foreign ownership of aviation companies, we conduct Helicopter Activities in many foreign countries through interests in unconsolidated affiliates. In some cases, we realize revenue from these foreign operations by leasing aircraft and services and technical support to those entities. We also receive dividend income from the earnings of some of these entities. We report lease revenue as operating revenue and dividend income as part of earnings from unconsolidated affiliates, as the results of these foreign operations are not included in our revenue or operating income. For additional information about these unconsolidated affiliates, see Note C in the “Notes to Consolidated Financial Statements” included elsewhere in this Annual Report.

Critical Accounting Policies

     Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. In many cases, the accounting treatment of a particular transaction is specifically dictated by generally accepted accounting principles, whereas, in other circumstances, we are required to make estimates, judgments and assumptions that we believe are reasonable based upon information available. We base our estimates and judgments on historical experience and various other factors that we believe to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions and conditions. We believe that of our significant accounting policies, as discussed in the “Notes to our Consolidated Financial Statements”, the following involve a higher degree of judgment and complexity.

     Income Taxes. We recognize foreign tax credits available to us to offset the U.S. income taxes due on income earned from foreign sources. These credits are limited by the total income tax on the U.S. income tax return as well as by the ratio of foreign source income in each statutory category to total income. In estimating the amount of foreign tax credits that are realizable, we estimate future taxable income in each statutory category. These estimates are subject to change based on changes in the market condition in each statutory category and the timing of certain deductions available to us in each statutory category. We periodically reassess these estimates and record changes to the amount of realizable foreign tax credits based on these revised estimates. Changes to the amount of realizable foreign tax credits can be significant given any material change to our estimates on which the realizability of foreign tax credits is based.

     Impairment of Long-Lived Assets. We review long-lived assets for impairment at least annually, or more frequently whenever events occur or changes in circumstances indicate that the carrying amount of assets may not be recoverable. We measure recoverability of assets by comparing the estimated future undiscounted cash flows expected to result from these assets throughout their estimated useful lives to the carrying amount of the asset. If the sum of the expected future cash flows is less than the carrying amount of the asset, we would be required to recognize an impairment loss. When determining fair value, we utilize various assumptions, including projections of future cash flows. A change in these underlying assumptions will cause a change in the results of the tests and, as such, could cause fair value to be less than the carrying amounts. In such event, we would then be required to record a corresponding charge, which would reduce our earnings. We continue to evaluate our estimates and assumptions and believe that our assumptions, which include an estimate of future cash flows based upon the anticipated performance of the underlying business units, are appropriate.

     Revenue Recognition. Revenue from charters of helicopters are recognized as performed based on contractual charter rates. The helicopter charters are for varying periods and generally permit the customer to cancel the charter before the end of the contract term. The charges under these charter contracts are generally based on either a daily or monthly fixed fee plus additional fees for each hour flown. Additionally, we also provide services to customers on a basis we refer to as “ad hoc”, which usually entails a shorter notice period and shorter duration. Our charges for ad hoc services are generally based on either an hourly rate, or a daily or monthly fixed fee plus additional fees for each hour flown. Our rate structure is based on fuel costs remaining at or below a predetermined threshold. Fuel costs in excess of this threshold are charged to the customer. Revenue from Production Management Services is recognized as these services are performed.

     Allowance for Doubtful Accounts. We routinely review our accounts receivable balances and make adequate provisions for doubtful accounts based on historical experience, our customers’ financial strength and other information. If our evaluation of our customers’ creditworthiness changes or is incorrect, we may have to adjust the allowance for our receivables.

     Inventory Reserve. We maintain inventory that primarily consists of spare parts to service our aircraft. We periodically review the condition and continuing usefulness of the parts to determine the adequacy of the valuation reserve. If our valuation of these parts is significantly different from the realizable value of the parts, an additional provision may be required.

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     Insurance. We are self-insured for our group medical insurance program and must make estimates to record the expenses related to this program. We also have deductibles on our workers’ compensation program and estimate the expenses related to the retained portion of that risk. If actual experience under any of our insurance programs is significantly different from our estimates, we may have to record charges to income when we identify the risk of additional loss. Conversely, if actual costs are lower than our estimates or return premiums are larger than originally projected, then we may have to record credits to income when we identify the excess return premiums.

Results of Operations

     The following table presents our operating results and other income statement information for the fiscal years ended March 31, 2003, 2002 and 2001:

     The following table sets forth, for the periods indicated, certain operating information for our two segments, Helicopter Activities and Production Management Services, and for the four business units comprising our Helicopter Activities segment. The table also presents certain operating information about our corporate activities which primarily relate to intercompany leasing of aircraft and are eliminated in consolidation. Certain reclassifications have been made to prior year information to conform to the current presentation of Technical Services as a separate business unit within the Helicopter Activities segment. For additional information about our business segments, see Note K in the “Notes to Consolidated Financial Statements” included elsewhere in this Annual Report.

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Fiscal 2003 compared to Fiscal 2002

     Consolidated Results

     During fiscal 2003, our operating revenue increased to $555.1 million, or 9.2%, from $508.6 million in fiscal 2002. The increase in operating revenue was primarily a result of increased oil and gas activity in our International Operations and rate increases on customer contracts in our North Sea Operations. Our fiscal 2003 consolidated operating expenses increased to $490.1 million, or 11.4%, from $440.0 million in fiscal 2002. This increase in operating expenses was due primarily to higher labor and insurance costs and had the effect of lowering our operating margin to 12.4% from 14.2% in the prior fiscal year. As a result, operating income for fiscal 2003 decreased to $68.8 million as compared to $72.1 million for fiscal 2002.

     Our fiscal 2003 net income was $43.1 million, representing a 3.0% decrease from fiscal 2002. This decrease primarily resulted from our reduced operating income, which was partially offset by a $5.5 million increase in earnings from unconsolidated affiliates primarily due to dividends from our unconsolidated affiliate in Egypt. Set forth below is a discussion of the results of our segments and business units.

     Helicopter Activities

	Operating revenue from Helicopter Activities increased to $512.8 million, or 9.6%, during fiscal 2003, with operating expenses increasing by 12.3% to $446.6 million. This led to an operating margin of 12.9% in fiscal 2003 as compared to 15.0% in fiscal 2002. Helicopter Activities results are further explained below by business unit.

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North American Operations. Operating revenue from our North American Operations decreased in fiscal 2003 to $150.6 million, or 3.9%, from the prior fiscal year primarily as a result of a 7.1% decrease in flight activity from the prior fiscal year. Operating revenue declined less rapidly than flight hours due primarily to the full fiscal year effect of the 30% rate increase that was phased in beginning in June 2001. Flight hours and operating revenue generated from larger, crew change aircraft in the Gulf of Mexico decreased 24.8% and 16.5%, respectively, from the prior year due to the decrease in drilling activity in the Gulf of Mexico during fiscal 2003. By contrast, flight hours and operating revenue from smaller, production related aircraft decreased 5.7% and 1.0%, respectively. In addition flight hours and revenue from our North American Operations declined due to unusually poor weather conditions in the Gulf of Mexico during the fourth quarter and to the termination by a large customer of its helicopter contract. During fiscal 2002, this customer had 10 aircraft on full-time monthly contract, including two crew change aircraft and eight smaller aircraft and accounted for approximately $15.9 million of revenue for our North American Operations. In fiscal 2003, through the termination of its contract, this customer accounted for approximately $5.0 million in revenue for our North American Operations. Monthly contracts with other customers were added during fiscal 2003 partially mitigating the impact of this lost work.

Our operating margin in our North American Operations of 10.6% for fiscal 2003 decreased from 18.0% in the prior fiscal year. The decrease in operating margin was primarily a result of lower revenue as discussed above and wage increases for pilots, mechanics and other operational employees in response to increases in the market wages for these employee groups. Insurance costs also increased substantially. Higher depreciation costs as a result of aircraft purchased in the prior fiscal year also contributed to the decline in the operating margin.

North Sea Operations. Operating revenue from our North Sea Operations increased in fiscal 2003 to $189.5 million, or 9.2%, from fiscal 2002 revenue of $173.6 million. Excluding foreign exchange effects, fiscal 2003 revenue from these operations increased 3.0% from fiscal 2002 revenue. The increase in operating revenue primarily resulted from rate increases on customer contracts both at mid-term and upon renewal, and a favorable change in the mix of aircraft operated in fiscal 2003. Flight hours for the current fiscal year decreased by 3.7%.

On July 16, 2002, one of our S-76 helicopters, while ferrying passengers for a customer, crashed in the southern sector of the North Sea. As a result of the accident, the customer immediately grounded the six S-76 helicopters it had under contract with us. This grounding was lifted by the customer for two aircraft on August 7, 2002 and in early September 2002 for the remaining four aircraft. We covered the customer’s requirements by using a different aircraft type. Accordingly, flight hours were impacted, but not significantly, by the accident.

Operating expenses from our North Sea Operations increased to $168.4 million, or 5.8%, in fiscal 2003 from $159.2 million in fiscal 2002. The increase in operating expenses was primarily the result of higher employee wages and an increase in insurance costs. In addition, we incurred approximately $1.6 million in uninsured costs as a result of the North Sea accident. These costs primarily related to the retiring of main rotor blades that had a similar history to the one that was involved in the accident. The operating margin in our North Sea Operations increased to 11.2% in fiscal 2003 from 8.3% in fiscal 2002.

During November 2002, we sold assets related to our activities in Italy. We recognized a pre-tax loss on the disposal of these assets during fiscal 2003 of $1.3 million, which is recorded in the gain on disposal of assets in our accompanying consolidated statements of income. These assets generated approximately $12.8 million of operating revenue for our North Sea Operations for fiscal 2003 and $15.0 million for fiscal 2002. The loss represents the excess of book value over sales proceeds, plus the accrual of certain obligations totaling $0.9 million which have been reflected in our March 31, 2003 consolidated balance sheet. Additionally, we expect to consummate the sale of three additional aircraft based in Italy. These aircraft are currently leased by us from a third party and subleased to the buyer. The sales of the aircraft are contingent upon our exercising purchase options under the leases and the closing of the sale to the buyer. Gains resulting from these aircraft sales are expected to be approximately $4.3 million.

International Operations. Operating revenue from International Operations increased in fiscal 2003 to $164.1 million, or 13.5%, from $144.6 million in fiscal 2002, primarily as a result of a 5.7% increase in flight activity from the prior fiscal year. These increases were primarily attributable to the expansion of our operations in Nigeria, through the acquisition of additional aircraft in July 2002, and an increased level of oil and gas activity in Mexico and Trinidad which resulted in increased demand for our services.

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In Mexico, flight activity and operating revenue for fiscal 2003 increased over the prior fiscal year levels by 29.7% and 24.4%, respectively. The increase in flight activity and operating revenue were primarily due to additional work that we performed for a major customer. Three aircraft were transferred to Mexico in the first half of calendar 2002 as a result of this demand. The operating revenue generated from these three aircraft accounted for approximately 64% of the increase in revenue in Mexico for fiscal 2003.

In Nigeria, operating revenue was up by 18.5% and flight activity increased 11.2% for fiscal 2003 over the prior fiscal year. On July 1, 2002, we purchased a controlling interest in a West Africa helicopter operating company, ten single engine helicopters and three fixed wing aircraft for $16.0 million. The acquisition was financed with $2.0 million of our existing cash and borrowings of $14.0 million under our U.S. credit facility. In connection with the acquisition, we began to provide services to a major oil company under a five year contract. Excluding the flight activity and revenue relating to this contract, flight activity and revenue in Nigeria decreased for the current fiscal year by 33.4% and 12.0%, respectively, over the prior fiscal year. The disproportionate decrease in flight activity and operating revenue is primarily due to a change in the structure of one contract whereby the customer now provides its own aircraft and we provide the crew, maintenance and technical support needed to operate the aircraft. Additionally, the completion of a contract and a decrease in ad hoc work during the current fiscal year had a negative impact on flight activity and revenue.

In Trinidad, operating revenue and flight activity for fiscal 2003 increased by 32.8% and 31.6%, respectively, over the prior fiscal year. The increase in flight activity was primarily due to a short-term contract in fiscal 2003 and increased drilling activity. Operating revenue for fiscal 2003 was also favorably impacted by the full fiscal year effect of a rate increase that became effective October 1, 2001.

Operating expenses for our International Operations increased in fiscal 2003 to $138.1 million, or 17.3%, from $117.8 million in fiscal 2002. This increase was primarily a result of higher salary costs, maintenance costs and lease fees due to increased operations in our international areas. The operating margin in our International Operations decreased to 15.9% in fiscal 2003 from 18.6% in fiscal 2002.

Technical Services. Operating revenue for Technical Services increased during fiscal 2003 to $45.7 million, or 66.9%, compared to $27.4 million in the prior fiscal year, primarily as a result of the expansion of these operations in December 2001 when we acquired an engine repair and overhaul facility that enabled us to provide these services to third parties. Operating expenses for Technical Services increased in fiscal 2003 to $42.7 million, or 59.2%, from $26.8 million in fiscal 2002. The increase in operating expenses was due largely to the expansion of our operations discussed above, salary increases and additional material cost associated with an increase in projects. Operating margin for Technical Services for fiscal 2003 increased to 6.5% from 2.0% in the prior fiscal year.

     Production Management Services

Operating revenue from our Production Management Services segment increased to $47.7 million, or 4.4%, in fiscal 2003 from $45.7 million in fiscal 2002, primarily due to the addition of a contract with a major customer in January 2002. Operating expenses in this segment increased to $44.7 million, or 2.8%, in fiscal 2003 from $43.5 million in fiscal 2002 due to higher transportation charges offset by a reduction in goodwill amortization expense of $1.1 million due to the adoption of Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” on April 1, 2002. Our operating margin improved to 6.2% from 4.8% in fiscal 2002.

     General and Administrative Costs

     Consolidated general and administrative costs increased by $2.7 million in fiscal 2003 primarily due to an increase in professional fees and higher salary expenses. Professional fees in fiscal 2003 included legal fees incurred in connection with our listing on the New York Stock Exchange and new corporate governance legislation, and fees for various consulting services.

     Earnings from Unconsolidated Affiliates

     Earnings from unconsolidated affiliates increased in fiscal 2003 by $5.5 million primarily due to an increase in dividends received from investments accounted for under the cost method of accounting. The increase was primarily due to dividends from our unconsolidated affiliate in Egypt.

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     Other Income (Expense)

     Other expense, net for fiscal 2003 was $3.3 million compared to other income, net, of $1.1 million in fiscal 2002. The expense in fiscal 2003 was primarily the result of foreign currency exchange losses.

Fiscal 2002 compared to Fiscal 2001

     Consolidated Results

     During fiscal 2002, our consolidated revenue increased to $508.6 million, or 6.6%, from $477.0 million in fiscal 2001. The increase in revenue was due primarily to rate increases in both our North American and North Sea Operations, which also resulted in an increase in operating margin to 14.2% in fiscal 2002 from 11.6% in fiscal 2001. Fiscal 2002 consolidated expenses increased to $440.0 million, or 4.0%, from $423.1 million in fiscal 2001.

     Helicopter Activities

Operating revenue from Helicopter Activities increased in fiscal 2002 to $468.0 million, or 8.4%, from $431.5 million in fiscal 2001, with operating expenses increasing by only 6.3% to $397.9 million. This led to an operating margin of 15.0% in fiscal 2002 as compared to 13.3% in fiscal 2001. The improvement in margin resulted from increased revenue due primarily from rate increases in both our North American and North Sea Operations. Segment results are discussed below in further detail by business unit.

North American Operations. Operating revenue from our North American Operations for fiscal 2002 improved to $156.7 million, representing an increase of 26.2% over the prior fiscal year primarily due to a 13.9% increase in flight activity and rate increases averaging 6% and 30% which went into effect in January 2001 and June 2001, respectively. Flight hours and revenue generated from larger, crew change aircraft in the Gulf of Mexico increased by 1.7% and 26.6%, respectively, from the prior year, while flight hours and revenue from smaller, production related aircraft increased by 16.0% and 28.2%, respectively. The increase in activity from the smaller, production related aircraft was a result of our focus on production related contract opportunities.

The rate increase of 30% in June 2001 was the largest in our 30 year history. These rates became effective for all contracts and were phased in over several months. A portion of the rate increase was needed to cover additional salary costs. In light of salary increases announced by our competitors and the shrinking pool of qualified personnel, we increased our wage rates effective July 2, 2001, for pilots, mechanics and other operational employees in our North American Operations. As a result, we incurred an additional $2.4 million in salary costs for fiscal 2002. Our 18.0% operating margin for our North American Operations in fiscal 2002 compared to 15.1% for fiscal 2001.

During September 2001, our North American fleet was grounded for three days as a result of the FAA’s closure of U.S. airspace. This grounding occurred on the three peak flying days of the week and management estimates that we lost approximately 1,000 hours of flight time as a result. We received approximately $0.5 million in January 2002 from the Department of Transportation as partial reimbursement for the revenue lost due to the grounding.

	As of March 31, 2002, the drilling rig utilization in the Gulf of Mexico was 61%, down from 91% at March 31, 2001. Consequently, our crew change services and the market for ad hoc work had diminished.

North Sea Operations. Operating revenue from our North Sea Operations increased in fiscal 2002 to $173.6 million, or 1.5%, from $171.0 million in fiscal 2001. Flight activity in fiscal 2002 decreased, however, by 1.9% from fiscal 2001. The net decrease in flight activity resulted from increased activity in our North Sea markets which was more than offset by a decrease in flight activity as a result of our deconsolidation of the results of our Norwegian affiliate as discussed below. The increase in operating revenue from North Sea Operations resulted from an increase in oil industry activity as well as rate increases on customer contracts both at mid-term and upon renewal. Additionally, the tightening of the supply of helicopters in the North Sea resulted in premium rates being charged for ad hoc flights.

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The decrease in operating revenue from Norway was the result of an accounting change during fiscal 2002, whereby the results of our Norwegian affiliate are no longer consolidated in our financial statements. Since then, the affiliate has instead been treated as an unconsolidated affiliate. See Notes A and C in the “Notes to Consolidated Financial Statements” for a further discussion. If we had continued to consolidate the affiliate throughout fiscal 2002, our flight revenue would have increased by 13.2% from the prior fiscal year.

Operating expenses from our North Sea Operations decreased to $159.2 million in fiscal 2002, or 1.9%, from $162.2 million in fiscal 2001. This decrease was primarily the result of the deconsolidation of the Norwegian affiliate discussed above. Fiscal 2002 costs included $3.5 million in salary adjustments resulting from our negotiations with the two unions representing our North Sea workforce. The operating margin in our North Sea Operations improved to 8.3% in fiscal 2002 from 5.1% in fiscal 2001.

International Operations. Operating revenue and flight hours in our International Operations increased in fiscal 2002 by 5.5% and 3.2%, respectively, from fiscal 2001, primarily as a result of an increase in activity in Nigeria and Trinidad. In Nigeria, revenue and flight activity were up 11.3% and 8.1%, respectively, from fiscal 2001 due to the further development of deep-water projects. Operating revenue and flight activity in Trinidad increased by 53.1% and 28.7%, respectively, from fiscal 2001 due to additional drilling and a rate increase effective October 2001.

Technical Services. Operating revenue for Technical Services decreased to $27.4 million, or 10.3%, in fiscal 2002 from $30.5 million in fiscal 2001. Operating expenses for Technical Services decreased in fiscal 2002 to $26.8 million, or 4.9%, from $28.2 million in fiscal 2001. The decrease in operating expenses was primarily a result of fewer projects being performed for customers. The operating margin for fiscal 2002 decreased to 2.0% from 7.7% in the prior fiscal year.

     Production Management Services

Operating revenue for our Production Management Services segment decreased in fiscal 2002 to $45.7 million, or 5.7%, from $48.5 million in fiscal 2001, primarily due to the loss of a contract with a major customer in May 2001. Operating expenses in this segment decreased to $43.5 million in fiscal 2002, or 5.3%, from $45.9 million in fiscal 2001. This segment’s fiscal 2002 operating margin of 4.8% was below the comparable 5.2% in fiscal 2001 primarily as the result of an increase in insurance costs in fiscal 2002.

     General and Administrative Costs

     Consolidated general and administrative costs increased by $1.3 million in fiscal 2002 primarily due to an increase in operating activity in fiscal 2002.

     Earnings from Unconsolidated Affiliates

     Earnings from unconsolidated affiliates, net increased in fiscal 2002 by $1.4 million primarily due to increases in earnings from equity investments accounted for under the equity method of accounting.

     Other Income (Expense)

     Other income, net, for fiscal 2002 was $1.1 million compared to other income, net of $0.3 million in fiscal 2001. The increase in income in fiscal 2002 was the result of foreign currency exchange gains and losses.

Liquidity and Capital Resources

     During fiscal 2003, our primary source of funds to meet working capital needs, service debt and fund capital expenditures was cash from operations. We believe that our future cash flow from operations, available lines of credit and other available financing will be sufficient to meet our working capital, capital expenditure and debt service needs in the foreseeable future.

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     Operating Activities

     Cash and cash equivalents were $56.8 million, $42.7 million and $54.8 million as of March 31, 2003, 2002 and 2001, respectively. Working capital as of March 31, 2003, 2002 and 2001 was $112.5 million, $147.0 million and $133.5 million, respectively. The decrease in working capital in fiscal 2003 was due primarily to the classification of the $90.9 million outstanding principal amount of the 6.0% convertible subordinated notes due in December 2003 in current maturities of long-term debt.

     Cash flows provided by operating activities were $62.4 million in fiscal 2003 as compared to $64.3 million in fiscal 2002 and $60.5 million in fiscal 2001. The decrease in cash flows provided by operating activities in fiscal 2003 was primarily the result of decreases in accrued liabilities and other payables. The increase in cash flows in fiscal 2002 from fiscal 2001 was a result of improved earnings in fiscal 2002.

     Investing Activities

     Cash flows used in investing activities were $48.2 million, $64.2 million and $35.5 million for fiscal 2003, 2002 and 2001, respectively.

     Fiscal 2003. During fiscal 2003, we received proceeds of $22.8 million primarily from the disposal of aircraft, and we purchased one EC 120 for $1.0 million, two Bell 407s for $2.6 million, four Bell 412s for $8.5 million, one King Air for $2.4 million, one Bell 206 L-3 for $0.7 million and seven Bell 206 L-4’s for $7.7 million. In addition, we paid $3.5 million of the balance due on an AS 332L2 Super Puma. An additional approximately $4.4 million is payable in November 2003 on this aircraft. Subsequent to the end of fiscal 2003, we purchased one Bell 206 L-4 for $0.9 million.

     In May 2003, we also entered a purchase agreement with Bell Helicopter Textron Canada Ltd. for five new medium sized aircraft. The total purchase price for all five aircraft is $30.0 million, of which we have already paid a deposit of $6.0 million subsequent to March 31, 2003. The balance of the purchase price is being financed by Bell Helicopter Finance Group for 90 days with interest payable at the 3 month LIBOR plus 2.95%. This short term note will be collateralized with liens on helicopters we currently own. In addition, we purchased one Bell 412 for $5.3 million. We intend to sell these six aircraft to an entity controlled by our Mexican unconsolidated affiliate, which will independently finance these aircraft. The aircraft are expected to service existing customers in Mexico.

     In November 2002, our Board of Directors approved a fleet and facilities renewal and refurbishment program. Under the program, we expect to incur approximately $150.0 million of capital expenditures over the next five to seven years to replace certain of our aircraft and upgrade strategic base facilities. As of March 31, 2003, we have expended $18.2 million as deposits and progress payments, and incurred firm purchase commitments of $125.2 under this program. Subsequent to March 31, 2003, we made additional payments under this program of $10.0 million. Sales and trade-ins of older aircraft will reduce the projected expenditures discussed above. We plan to use internally generated funds and available financing, if needed, to meet our obligations under the program.

     Fiscal 2002. During fiscal 2002, we received proceeds of $11.4 million primarily from disposals of aircraft, and we purchased six Bell 407s for $8.1 million, seven Bell 412s for $31.5 million, four Bell 206 L-4s for $3.5 million, nine EC 120s for $9.2 million, one Bell 206 L-3 for $0.7 million and one Augusta A109 for $3.3 million. In addition, we placed a deposit of $3.7 million on an AS 332L2 Super Puma. These aircraft acquisitions were made with existing cash and were made to fulfill customer contract requirements.

     Fiscal 2001. During fiscal 2001, we received $3.2 million from four separate disposals of aircraft and purchased ten Bell 206 L-1s for $3.8 million, two Bell 206 L-3s for $1.4 million, seven Bell 206Bs for $2.1 million, two Bell 407s for $3.1 million, three Sikorsky S76s for $4.3 million and three Bell 412s for $13.2 million. The majority of these aircraft purchases were made to fulfill customer contract requirements.

     Financing Activities

     Cash flows used in financing activities were $1.1 million, $12.0 million and $6.5 million in fiscal 2003, 2002 and 2001, respectively. Total debt as of March 31, 2003 was $232.8 million as compared to $208.0 million and $222.3 million as of March 31, 2002 and 2001, respectively.

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     U.S. Credit Facility. As of March 31, 2003, we had a $30.0 million unsecured working capital line of credit with a U.S. bank that expires on August 31, 2004. The line of credit is subject to a sublimit of $5.0 million for the issuance of letters of credit. Borrowings bear interest at a rate equal to one month LIBOR plus a spread ranging from 1.25% to 2.0%. The rate of the spread depends on certain ratios under the credit facility. Borrowings under this credit facility are unsecured and are guaranteed by certain of our U.S. subsidiaries. We had $14.0 million drawn on this facility as of March 31, 2003. We used these borrowings to finance the acquisition of additional operations and aircraft in West Africa in July 2002. In December 2002, our 6.0% convertible subordinated notes, which mature in December 2003, became classified as current maturities of long-term debt in our consolidated balance sheet. The classification of the notes caused our current ratio to drop below the minimum ratio required to be maintained under the covenants of our U.S. credit facility. We obtained a waiver to the violation through January 1, 2004. As of March 31, 2003, we were in compliance with all of the covenants under this credit facility. As of March 31, 2002, we had no funds drawn under our U.S. credit facility and we were in compliance with all covenants under this credit facility.

     U.K. Credit Facility. As of March 31, 2003, Bristow had a $18.9 million revolving credit facility, of which $9.5 million is only available for letters of credit, with a United Kingdom bank on which any borrowings are payable on demand. Borrowings under this credit facility bear interest at a rate of 0.7% above one, three or six month LIBOR rates. This credit facility is guaranteed by certain of Bristow’s subsidiaries and is secured by helicopter mortgages and a negative pledge of all of Bristow’s assets. As of March 31, 2003, Bristow had outstanding $5.5 million of letters of credit under this facility; however, no funds were drawn under this credit facility. As of March 31, 2003, Bristow was in compliance with all of the covenants under this credit facility.

     As of March 31, 2002, Bristow had $3.3 million of letters of credit outstanding under the U.K. credit facility, and no other funds were drawn. As of March 31, 2002, Bristow was in compliance with all of the covenants under this credit facility.

     6.0% Convertible Subordinated Notes. In December 1996, we issued $98.0 million aggregate principal amount of 6.0% convertible subordinated notes due 2003. During 1999, we repurchased $7.1 million in principal amount of the notes in the open market. The notes are convertible at any time into our common stock at a conversion price of $22.86 per share, or approximately 43.74 shares per $1,000 principal amount, and are redeemable at our option. The notes mature in December 2003 and are classified in current maturities of long-term debt in our consolidated balance sheet as of March 31, 2003. We are currently evaluating our options to refinance this obligation prior to maturity, and we believe that we have sufficient options in the marketplace to refinance the notes on favorable interest terms.

     7  7/8% Senior Notes. In January 1998, we issued $100.0 million aggregate principal amount of 7 7/8% senior notes due 2008. The notes are unsecured and are guaranteed by certain of our U.S. subsidiaries. The notes became redeemable in full at our option beginning in January 2003.

     Limited Recourse Term Loan. Our balance sheet reflects a term loan of approximately $23.1 million as of March 31, 2003. The loan is secured by two aircraft that we operate under an operating lease and we have provided a guarantee of up to $3.8 million of the original cost of the aircraft. The guarantee represents our maximum amount of credit exposure. The rate of interest payable under the loan is 7.1%, requires quarterly payments of $0.6 million and has a balloon payment of $19.4 million due in 2007.

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     Contractual Obligations and Commercial Commitments. The Company has the following contractual obligations and commercial commitments as of March 31, 2003: